Profit Sharing Question (employees, 401k, percentage, interviewing)

[aweitzm1]

I am interviewing for a position and one of the benefits is a Profit Sharing instead of a matching 401K.

I was wondering what exactly is involved with Profit Sharing? According to the recruiter the company has a 12% Profit Sharing but no matching 401K. Is this better than a matching 401K. I have only worked at companies with a matching 401K. According to the recruiter this is better because of the bigger percentage.

I thought profit sharing was at the discretion of the company, but according to the recruiter is it a customary 12% each year.

Any feedback would be great.

Thanks

[jribe]

profit sharing is just that - profit sharing, you won't know until they announce towards the end of the year what amount they will pay.. The company may set a target amount; or have paid "12% the last 3 years" - but it is not guaranteed and not tied to your performance. A 401k (if the employer does matching) is typically only paid at the amount that you put in. For example, if the company does matching at 6% - that would mean you would typically also need to contribute 6%.

Now the companies i've worked at have offered both- 6% match on 401k and usually a 6% on profit sharing (sometimes more)

[bell235]

my company has both.

profit sharing is basically a pool of money tied to the performance of a company that gets distributed to employees based on a formula (i think it's based on years of service, the longer you have been there, the more you get).

so if the profit sharing is $100,000 for the year, that $100,000 will be distributed to the employees.

keep in mind that most profit sharing has a vesting schedule whereas most 401k matches are 100% vested. most vesting schedules are 20% per year. so in the example above, if my portion of the $100k was $2,000, if i quit before i'm 100% vested then i do not get all of the $2,000, i will only get the portion i am vested in.

does that make sense?